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3 Reasons We Might Sell Intel

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

Intel reported third-quarter earnings. The report was not good. In fact, John and David have three reasons they may sell their shares of Intel. Management reported that Intel's sales fell 5.5% during the quarter and that earnings dropped 14.5%. John and David have been watching the PC vs. mobile computing trend, and it has turned out worse than expected for the likes of Intel. Advanced Micro Devices continues to slump, too. Some of the slump is due to increased tablet sales. Intel wants to challenge the current leader ARM Holdings, whose core designs are used by Qualcomm and NVIDIA for mobile chips. But even though it has a good plan, the company may be too late. Finally, its server chip business, which has been strong, slumped. That's another troubling sign. There's no doubt that Intel is a strong company. But right now, all of the trends are working against it. It's time to reassess the situation, and consider cutting our losses and reallocating the capital.

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Comments from our Foolish Readers

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I have only been looking at this site for about a year, but this is one of those stories that make me scratch my head.

On April 23, 2012 Intel hit its 5 year high of $28.38. In the last six months it has fallen to $21.26. Has the business model of Intel changed in the last 6 months? Should this article have been written 6 months ago when Intel was at its high? Is Intel in danger of going out of business like AMD? Am I missing something with the advice to sell a DOW Dog that is currently paying a 4.1% dividend at a 52 week low? Is Intel planning to cut the dividend? Can Intel support the dividend? Is Intel such a small company that it cannot adapt to a mobile platform? Isn't this a good time to purchase a DOW Dog at a really reasonable price? Is this not a buy high, sell low article?

I can now see how it will be five years from now: PC sales will be down to 1,000/year mostly to collectors and nostalgia buffs. AMD will consider a 20% cut in personnel but definitly not the janitor/engineer/maintenance guy. ARM servers, massively arrayed, will run the net. It will take forty-three trillion of them, but each one runs on 2 AA batteries. Intel is no longer in the CPU business, but a fortunate investment overseas and they segued into 'The India Pizza Co.' Oh yeah-It's still the USA. (United States and Apple.)

I completely understand why you might be scratching your head. In the video, we drilled down quite a bit on both the pros and cons of INTC going forward.

Our aim was to raise the questions in a public forum, since this one is a tough one. In the video, David, who I consider an extremely talented and careful analyst. said that he felt that INTC is getting hit harder by the slumping PC market than he had originally thought. He noted that he was also surprised by the slump in its server chip business. All in all, David honestly admitted that INTC's core business is getting hit harder than he had envisioned and that it might be too late to take advantage of the mobile trend.

We like this company and don't enjoy selling in general. So we wanted to have a discussion, while also thinking long and hard about it.

I totally get why you might not like video in general -- but there is more detail, there. We try to provide a good synopsis, but obviously, we don't capture all of the discussion in that.